Cryptocurrencies have been under pressure since the start of 2022 as investors question the valuation of risky assets. But even as cryptocurrencies fall, the underlying development taking place in the crypto industry continues.
I think the cryptocurrencies focusing on real utility will ultimately be the most valuable. And there are some great utilities being built today on Solana (SOL 0.15%), Ethereum (ETH 0.20%), and Polkadot (DOT 0.32%). Let's take a quick look at each of them.
The home to innovation and gamers
Solana was one of the best-performing cryptocurrencies in 2021, and I think that will continue in 2022. It wasn't driven by speculation that values will go up, but rather because a utility ecosystem is being created.
Developers are building rapidly on Solana, with NFTs launching daily, marketplaces booming, and decentralized finance (DeFi) projects advancing as well. That's on top of the game ecosystem, which has at least $250 million of venture funding heading its way.
High speeds and low transaction costs are two of the big advantages Solana has, and I think this will lead to big innovations in 2022, pushing Solana cryptocurrency higher along the way.
The OG smart contract blockchain
Ethereum has faced a number of challenges during the past few months, from high transaction fees to a clogged, slow network. But an upgrade to Ethereum 2.0, which includes a proof-of-stake transaction validation system, should bring faster speeds and lower costs to the blockchain.
In a lot of ways, Ethereum has a big leg up on competitors in building out the crypto ecosystem. It has established NFT marketplaces, tools for building websites that NFTs give access to, and well-known digital wallets. And it's where the most valuable NFTs trade hands on a daily basis. These advantages won't last if transaction costs aren't lowered. But if Ethereum 2.0 lives up to expectations, we could see Ethereum's value unlocked for even more projects and investors in 2022.
One positive sign for Ethereum is that people are still trading billions of dollars in assets despite high transaction costs. If the blockchain is that popular with high costs, how popular would it be with lower costs and faster transactions?
An up and comer
Another utility token is Polkadot, which was started by Ethereum co-founder Gavin Wood to address some of Ethereum's core problems. The project uses what are called parachains, which let developers build on the blockchain in a way that's more flexible than other blockchains.
The innovations are only now being unlocked, but Polkadot's technology allows for public and private blockchains that can talk with each other, letting companies and government organizations build private yet accessible data.
Like most of the crypto ecosystems, Polkadot is early in its development, and there is a lot yet to be unlocked, but there's plenty of potential with the underlying technology. That's why I think this is a great cryptocurrency for 2022.
Innovation on the blockchain
You'll notice that the one commonality between these cryptocurrencies is that they're building utility into the blockchain. That's where I think the real value in crypto will be long-term, rather than the speculative trading that drove prices in 2020 and 2021. Solana, Ethereum, and Polkadot are utility tokens that could redefine the digital economy, and that's why they're my picks this month.